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Scholarships for nonresident aliens; transfers of property to foreign corporation

Treatment of scholarships for nonresident aliens

The IRS Large Business and International (LB&I) division today publicly released two practice units—as part of a series of IRS examiner “job aides” and training materials intended to describe for IRS agents leading practices for specific international and transfer pricing issues and transactions. The two practice units released today concern the tax treatment of scholarships and fellowship grants paid to nonresident aliens and situations when a Form 926 is not filed on the transfer of property to a foreign corporation.

Related content

Taxation of scholarships and fellowship grants paid to a nonresident alien

Failure to file the Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation—monetary penalty

The practice units (release date of June 14, 2016) are available on the IRS practice unit webpage.

KPMG observation

The IRS practice units identify areas of strategic importance to the IRS, provide insight as to how IRS examiners will approach various transactions, and generally provide an understanding of the context in which an IRS examiner will approach a particular issue or transaction.

Thus, taxpayers (and their tax advisers) facing an IRS examination or concerned with issue(s) presented by these practice units will want to review the relevant practice units, so as to have a better understanding of the issues that may arise either prior to or during an examination. For instance, the IRS practice units typically provide information that can help taxpayers:

Plan for appropriate documentation during return preparation

Effectively approach certain elections or certain transactions

Respond appropriately to IRS correspondence

For taxpayers selected for a pending IRS examination, the practice units can provide information that may assist with preparation for the examination. For taxpayers actually under examination, the practice units may provide information that can assist taxpayers respond to IRS requests.

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